What is an Advance Pricing Agreement (APA) under UAE CT

Along with the introduction of the corporate tax, the authorities of the UAE also introduced the transfer pricing regulations and framework in order to ensure that the related party transactions were carried out based on the arm's length method. Since then, the FTA and the official authorities of the UAE have issued multiple guides and instructions, which have aided the business entities and the taxpayers to solve the complexities involved in the related party transactions and the transfer pricing documentation, etc.

In December 2025 the authorities have further issued the APA guide, which includes the overview of the advance pricing agreement, which would enable the entities to decide on the opting of the APA scheme.

What is the APA program?

It is nothing but a voluntary scheme that is available for a person whereby it can enter into an agreement as per Article 59 of the Corporate Tax Law with the FTA in determining the arm's length price in relation to the controlled transactions for over a period of time, which could avoid any transaction pricing-related confusions, conflicts, or litigation.

What are the benefits of adopting APA?

FTA has encouraged the persons to enter into the agreement under the APA scheme, as it would provide the following benefits:

• It would enable the taxable persons to enhance the predictability of the controlled transactions for over a period and avoid any conflicts.
• It would enable the taxable persons to work in a collaborative environment with the FTA, which would enhance mutual understanding.
• It would also avoid the risk of TP disputes and litigation.
• It would further assist the taxable persons to avoid any double taxation circumstances.
• The taxable persons can also ensure the compliance by following the documentation requirements, which are clearly outlined under the APA scheme.

 What are the different types of APA?

As per the guide released by the FTA, there are 3 types of APAs, the first of which is UAPA and would be initially rolled out and implemented, and the other types would be implemented phase by phase. The types include the following:

Unilateral APA: It is the agreement between the person and the FTA only for the domestic and the cross-border transactions. Under this agreement there would be an assurance provided to the person related to the criteria and the key assumptions that would be followed in determining the arm's length price for the controlled transaction.

Bilateral APA: It is the agreement between the two competent authorities of two different jurisdictions reached through MAP

Multilateral APA: It is the set of agreements between more than two competent authorities reached through MAP.

What are the elements under the APA?

The major elements under the APA as per the guide include the following:

• The Parties to the APA
• The controlled transactions under the APA agreement
• The tax period covered
• The agreed TP criteria
• The key assumptions
• The key documentation and implementation mechanisms.

What are the eligibility criteria for entering into APA?

The eligibility criteria as per the guide include the following:

1. Any person who has entered into any domestic or cross-border-controlled transaction or has proposed the same can enter into the APA only if the controlled transaction meets the threshold of 100 million AED as per section 3.5 of the APA guide of FTA.
2. A person can also apply for the APA if there are significant complexities and uncertainties regarding the determination of the arm’s length price of the proposed or existing controlled transactions and if the controlled transactions were subject to audit earlier.

What is the threshold to be met to apply for the APA?

In order to enter into the APA by a person, the materiality threshold for the controlled transaction is AED 100 million per tax period. And as per the guide, only the transactions that are meant to be included in the APA should be considered. 

Who can apply for the APA?

The APA can be applied by the following persons:

•  The taxable person
• The tax agent of the taxable person. 
•  The legal representative of the taxable person, and in the case of a tax group, the parent company can apply

How can CDA help?

Navigating through the tax compliance requirements in the UAE requires a lot of understanding of the prevailing regulations and tax regimes. The businesses focused on growth and expansion might not get the required time and resources to sort the tax complications. The experts at CDA have been providing professional tax services to the clients in the UAE for more than a decade. Our professional tax team would assist your businesses to understand the tax regulations and get the tax reliefs and tax exemptions implemented, thereby reducing the tax liabilities.

To know more about the tax services, connect with our experts today!

Mitesh Maithia

Tax Manager

Mitesh is a Tax Professional with expertise in direct, indirect, and international taxation, including transfer pricing, since 2018. Passionate about making complex tax matters simple, he shares insights to help businesses stay compliant and forward-looking.